Eurozone business confidence proving resilient - MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the release yesterday of the latest PMI surveys from the euro-zone provided reassurance that the economic recovery is proving resilient to negative economic shocks.

Key Quotes

“The survey revealed that business confidence in the euro-zone improved by 0.5 point to 54.4 in November reaching its highest level since May 2011. Markit stated that the survey was consistent with economic growth of 0.4/0.5% in Q4. It was also notable that the employment and new business sub-components hit new cyclical highs as well proving a further positive signal for the economic recovery.”

“As Markit noted one caveat is that the ECB is still likely to be disappointed with the pace of growth given the amount of stimulus the economy is currently receiving. The survey also revealed that firms continue to cut prices. The composite output price index remained below the 50.0-level. Overall, we do not believe that the PMI surveys will prevent the ECB from easing monetary policy aggressively at next week’s meeting which will help to weaken the euro and reinforce the economic recovery.”

“It is reassuring that downside risks from the slowdown in emerging economies do not yet appear to be prompting weaker growth in the euro-zone. However, the negative impact of the Paris terrorist attacks has resulted in a hit to business confidence in France. The French composite PMI survey declined by 1.3 point to 51.3 in November. The decline was relatively modest and leaves business confidence broadly in line with its average so far this year which will help ease concern over the risk of deeper slowdown. We remain of the view that the negative economic impact from the terrorist attacks in Paris remains most likely to prove both limited and temporary.”
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